Matrimonial property regimes, conflicts between common law and civil law jurisdictions relating to matrimonial property, and current European Union guidance on conflicts of law in this respect.
What is a matrimonial property regime?
A matrimonial property regime is a generic term referring to one or more sets of rules incorporated into the law of the jurisdiction governing the ownership and management of property belonging to a couple during marriage and upon divorce. The value of rights to property is also covered and in some jurisdictions, the regime extends to civil partnerships. Common law jurisdictions do not usually have a matrimonial property regime.
In some jurisdictions, it may be possible to opt for more than one matrimonial property regime. For example, in Belgium there is both a community property regime and a separation of property regime. The latter treating all assets as being owned by either one spouse or the other.
Where a jurisdiction does have a matrimonial property regime, can you set/choose your own rules for a matrimonial property regime?
Yes. Spouses may agree, prior to marriage, on how to divide their matrimonial property if they get divorced or on death of a spouse (for example a pre-nuptial agreement could be used in jurisdictions which recognise such agreements or by each spouse writing a Will).
In some jurisdictions, it may be possible to opt for more than one matrimonial property regime and therefore the couple will need to declare which regime should apply at the time of marriage.
Where a jurisdiction does have a matrimonial property regime, what happens if you do not set/choose your own rules?
If nothing is agreed or declared, the community property regime will be automatically applied on death or divorce.
What is the community property regime?
The community property regime is a matrimonial property regime which presumes certain assets purchased during marriage have shared benefit to the spouses. i.e these assets are ‘community property’ and each spouse is entitled to 50% of the value.
The prescribed rules will be laid out in the law of the jurisdiction and can differ between jurisdictions. The rules cover how community property should be split on death or divorce. It also covers what property should be included in the community property regime and which can be excluded.
Generally property owned before the marriage will not be community property.
In Italian Law:
Each spouse automatically owns a 50% equitable share (regardless of the legal ownership) in:
- all property acquired together or separately by each spouse during marriage,
- all income from each of the spouse’s work and business activities established and managed by both during marriage,
- company shares and State bonds purchased during the marriage, and
- companies created during marriage and managed by both spouses.
Excluded property includes any property purchased during marriage through donations, inheritance or legacy, properties acquired through payment of damages, pension given for partial or total incapacity to work, properties purchased by income from the spouse’s exclusive personal property.
Conflicts of law
Most civil law jurisdictions have a defined community property regime, this is less common in common law jurisdictions. For a client who holds assets in various jurisdictions, or who is living in a different country to that of their nationality, this can add a layer of complication when considering control and protection of assets in respect of marriage, divorce and Will planning where they are married.
Mr Jones married his wife in 1982 in England where he had lived all his life. Mr Jones is a UK national. Shortly after the marriage, Mr and Mrs Jones moved to France where they have lived ever since. Mrs Jones is a French national and a full time mother to their three children. She has never worked. Mr Jones is in full time employment. Mr Jones is looking at writing his Will.
If Mr Jones dies whilst living in France, French Law ('the French Code') will apply to the distribution of his estate. France is a civil law jurisdiction and a community property regime applies.
If Mr Jones were to return to England, then the Laws of England and Wales would apply. England is a common law jurisdiction and there is no recognised community property regime.
It is therefore necessary for Mr Jones to revise his Will if he moves jurisdiction.
Position if Mr Jones dies in France
Basing his Will upon the French Code, it is first necessary to look at which assets will be included in the community property regime in France:
Assets purchased before the marriage
Assets purchased during the marriage
- UK Shares
- Vintage sports car
- UK pension
- A share portfolio diversified across Asia, UK, Latin America and central Europe.
- Family home in France;
- UK holiday home held in Mr Jones sole name
- French pension
- Savings contract for school fees funding
All assets purchased since the marriage will be deemed to be community property under the French Code, regardless of whether the assets were held solely by Mr Jones, or only Mr Jones contributed to the purchase (and maintenance where applicable) of the assets unless the assets would be considered excluded property from the community property regime.
Under the community property regime prescribed in the French Code, Mrs Jones owns the UK holiday home and would become the sole owner. Mrs Jones ownership of the UK holiday home under the French community property regime would not automatically be recognised in English law, so the UK courts would look to the Will or UK intestacy rules to decide who would be beneficially entitled to the UK holiday home.
Mr Jones’ Will therefore needs to address the assets owned before his marriage, and the UK holiday home purchased since the marriage to avoid the need to go to the UK courts in respect of the UK property.
Position if Mr Jones dies in England
Conversely, if Mr Jones died while living in England, there would be no community property as matrimonial property regimes do not exist in English Law, therefore other than assets held in joint names with Mrs Jones, Mr Jones assets will need to be covered in his Will regardless of whether these were purchased before or since their marriage.
The position would be the same in respect of divorce cases. Depending on which courts deal with the divorce, and therefore which law is applicable.
Using the above example, where Mrs Jones filed for divorce in the French courts, she would be automatically entitled to a 50% share of all assets purchased since the marriage. Whereas, if Mrs Jones filed for divorce in the UK there would be no such automatic entitlement to this property and the courts would need to decide how the assets are split.
Current position in European Union
Where two people of different nationalities or two people who no longer live in the same member state wish to divorce, they need to know to which courts or authorities they must apply for a divorce. The EU has recognised there are conflict of laws in respect of matrimonial property for divorce cases between different European Union (EU) member states and the potential for abuse.
In 2000, the European Council adopted a regulation that determines:
- which member state’s courts have jurisdiction to rule on divorce proceedings, and
- how divorces granted in one member state are recognised in other member states.
It came into effect on 1 March 2001 and all member states except for Denmark adopted the regulation.
The regulation also deals with parental responsibilities. However, the regulation does not deal with maintenance provisions for dependents, or the division of marital property, which would still be decided by the appropriate court.
This regulation was replaced by Council Regulation (EC) No 2201/2003, which extended the scope of the regulation to include legal separations and annulments as well as divorce judgements.
Which courts have jurisdiction
Courts have jurisdiction to give a divorce ruling:
- in the member state in which the spouses live
- in the member state in which the respondent lives
- if the spouses live in different member states, in the member state in which they both lived last, provided at least one of them still lives there
- if a joint application for divorce, then in the member state where one of the spouses lives
- in the member state of which the spouses are nationals
- in some circumstances, in the member state in which the petitioner resides.
The parties cannot choose another court.
Recognition of decisions
Where applicants file for divorce in more than one member state, it is the first court to rule on decisions that have jurisdiction. The decisions made in one member state will automatically be recognised in another member state.
A divorce granted in one member state shall be automatically recognised in another member state without special procedures. This means there is no special procedure required to update civil status documents in another member state. The request should be made based on a final divorce (or legal separation or annulment) judgement, which may not be locally appealed.
There are however exceptions to recognising decisions made. For example where they are contrary to public policy, or the decision contradicts a previous decision made in another jurisdiction.
Future steps in the EU
The European Commission issued a Green Paper on 14 March 2005, which became a proposal to the European Council on 17 July 2006, on applicable law and jurisdiction in divorce matters. The intention of the proposal was to set strict rules for which jurisdiction’s laws should apply for divorce (and legal separation) cases; and including division of property and maintenance for dependents. In 2008, it became clear that finding unanimity on this proposal was going to be difficult. The proposal has yet to be effected.
Consequently, a number of EU countries have since then expressed their intent to establish enhanced cooperation in the area of applicable law in matrimonial matters. This was acknowledged by the European Council, by a Council decision, on 12 July 2010. The other EU countries may join in on this cooperation at any time.
Enhanced cooperation in the area of law applicable to divorce and legal separation will provide the participating countries with a clearer and more comprehensive legal framework for cross-border cases. This enhanced cooperation is based on the principles of mutual recognition of judgments and ensuring better compatibility between the participating countries’ rules on conflict of laws. This is an interim measure to providing a full regulation in the future.